IMF: Further RBA tightening needed to ensure inflation returns to target range by 2025
In its annual assessment of the Australian economy, the International Monetary Fund (IMF) highlighted that the economy is resilient while inflation remains sticky, arguing that further policy tightening is required from the Reserve Bank of Australia (RBA).
Key takeaways
“After a strong post-pandemic recovery, Australia’s economy is slowing but remains resilient.”
“Although inflation is gradually declining, it remains significantly above the RBA’s target and output remains above potential,”
“Staff therefore recommend further monetary policy tightening to ensure that inflation comes back to the target range by 2025 and minimize the risk of de-anchoring inflation expectations.”
“The Commonwealth government and state and territory governments should implement public investment projects at a more measured and coordinated pace, given supply constraints, to alleviate inflationary pressures and support the RBA’s disinflation efforts.”
Market reaction
AUD/USD is little impressed by the IMF findings, currently testing lows near 0.6320, down 0.19% on the day.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
